The economy will continue to improve this year following a negative first quarter but not enough to inspire a Fed rate hike before September, according to the Securities Industry and Financial Markets Association's latest economic outlook.
"There's a pretty strong consensus that the beginning of the year was a fluke and things are picking up," said Ethan Harris, chairman of SIFMA's Economic Advisory Roundtable, on conference call following release of the outlook. He characterized the outlook, based on a survey of 20 economists from U.S. broker-dealers and banks, as "cautiously optimistic."
Survey respondents were nearly unanimous in expecting that the Fed's first rate hike in nine years will be a third-quarter event. "September is the most likely date," said Harris, who is also the co-head of Global Economics Research at Bank of America Merrill Lynch.
"The Fed has made it pretty clear they really are ready to go if they just see better data," said Harris. No change in policy is expected to be made at the Fed's two-day policymaking meeting that began Tuesday.
The SIFMA Roundtable forecast 2.2% GDP growth for all of 2015, down from the 3% it forecast at the end of last year, and 2.8% for 2016. The downward revision for this year is due in large part to the 0.7% drop in first quarter growth, which Harris attributed to special factors including unusually cold weather, West Coast dock strikes and volatility in oil prices and the dollar.
Respondents expect growth will increase in each successive quarter this year, rising to 2.5% in the second quarter, 3% in the third and 3.1% in the fourth.
"The economy is already getting right back on track," said Harris. Consumers are spending more because of "solid job growth and the beginning of wage growth and solid assets" in stocks and housing, and business investment is improving following a slowdown due uncertainty about the dollar and oil prices, said Harris. The roundtable expects business investment will grow 3% this year and 4.6% next year.
